Apple missed expectations in its most recent quarter, but its results illustrated several trends business owners should be thinking about, such as the strategic importance of developing markets, customer loyalty, and diversification to survive change.
Keeping the sails in the wind
Revenue hit $89.5 billion, down about 1% on the last-year quarter, though company management tried to put a positive spin on the data.
Within the results, there were several key highlights, not least that Apple’s pivot to services has proved its value. Services revenue reached a new all-time high above $22.3 billion. For Apple, that’s a serious number, particularly as its combined Mac, iPad, wearables, home, and accessories business generated $23.3 billion in the same period, but at much lower margins. (Product margin hit 36.6%, said Apple.)
Across the last 12 months, services have generated $85 billion in revenue, around 70.9% of which was profit.
Bottom line?
Services is doing its job. It is, as I’ve argued, helping the company maintain its business during an incredibly challenging environment. Overall, gross margins reached 45.2%, “the highest level ever,” noted Deep Water analyst Gene Munster.
Weakness for the Mac, but was predicted
Speaking during its last quarter, Apple had warned Mac sales would decline, in part because on a year-by-year basis, the market itself has changed. Apple benefitted from a lot of pent-up demand for Macs following pandemic-related shutdowns, and (in the US, at least) also got a slice of the action following various economic stimulus payments.
All the same, the data was a little dispiriting as Mac revenue fell almost 34% — despite the release of the superb 15-in. M2 MacBook Pro.
With the introduction this week of M3 Macs, Apple CEO Tim Cook predicted a “significantly better” quarter for Mac sales in the current quarter, but described the PC market currently as “challenging.” It is worth noting that even while PC sales decline, Apple continues to build share.
The other challenge Apple faces is that for many users, the M1 Macs they purchased earlier still do everything they need, which means the upgrade cadence remains 3 to 5-years — though user satisfaction remains solid. Those M1 upgrades will start to show up in 2024, I suspect, particularly as MacBook Air and mini get M3 chips. Mac customer satisfaction in the US hit 97%.
Meanwhile, there are positive signs that tomorrow’s employees will want Macs.
“According to the latest data from Student Monitor, nearly two out of three college students use a Mac,” said Cook.
“Half of our Mac buyers during the quarter were new to the platform, driven by the MacBook Air,” said CFO Luca Maestri. “We expect Mac year-over-year performance to significantly accelerate from the September quarter.”
The day after tomorrow
No doubt, the economic consequences of war, disease, inflation, strained supply chains, and the consequences of climate change on…
2023-11-05 18:41:02
Link from www.computerworld.com rnrn